Norway’s Wealth Tax Discourages Skilled Talent

The Norwegian wealth tax does not differentiate based on the origin of assets. If a taxpayer has a fortune of NOK 10 million earned  abroad, Norway will tax these assets if the person moves to Norway. In light of the already high income taxation in Norway, the wealth tax may mean that the individuals choose not to relocate to Norway.

The initiative by the Ministry of Education is intended to appeal specifically to American researchers. In practice, we see that many Norwegian-Americans want to move to Norway. However, the Norwegian tax system is not adapted to the special arrangements that apply in the USA. This particularly concerns American pension schemes.

In Norway, our tax contributions help finance a public pension system that ensures a certain pension upon reaching retirement age. In other countries, this is different. Individuals are to a greater extent responsible for their own pensions, and there are distinct schemes in the USA which, under US regulations, are classified as pensions.

The Norwegian wealth tax generally includes all assets owned by the taxpayer. There are exceptions for certain assets, and so-called conditional rights are exempt from the wealth tax. Time-limited rights to periodic benefits will also be exempt from the wealth tax. This means that pensions will not be subject to wealth tax. A Norwegian taxpayer who has invested money in a pension scheme will therefore not have to pay wealth tax on funds set aside for future pension.

The problem for the American researcher is that in certain cases Norwegian tax authorities have taken a very aggressive approach to foreign pension schemes. Foreigners who have established pension arrangements under local rules can be met with wealth tax obligations if they move to Norway. The funds set aside for their pension are not created in Norway, and in practice the researchers do not have access to the funds until reaching retirement age, but this seems to be irrelevant to the Norwegian Tax Administration.

For researchers who considers to move to Norway, this creates uncertainty related to the Norwegian taxation of funds set aside for future pensions under the American system. For Americans, these funds belong to the future; they should not and will not be accessed until retirement age, but in some cases Norwegian tax authorities have defined this as savings included in taxable wealth. The combination of high income tax and wealth tax on funds that, for Americans, belong to their future, means that the cost of working in Norway can become too high.

The negative effect of the Norwegian wealth tax for immigrants is under-communicated in the debate over wealth tax. Norway has a unique opportunity to attract highly qualified researchers from the USA. In practice, several may choose not to come to Norway because the cost, due to the tax level, is simply too high.

The view we’ve observed from Norwegian tax authorities in individual cases, in our opinion, contradicts the tax treaty. However, the risk of a tax dispute with Norwegian tax authorities may be a desisive reason for not moving to Norway.

The wealth tax contributes to making Norway less competitive for skilled labour. As is well-known, the majority of our politicians apparently believe that the wealth tax is a brilliant idea—despite objections from tax advisors etc. Time will tell who is right when it comes to recruiting researchers.

This article was published in Finansavisen (Norwegian only).